Forex Trends of 2011: Opportunities for the Future

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It is impossible to predict what the future holds with regards to currency trading. It is a form of betting where one must make use of Forex trends from the past, weigh out probabilities and examine the overarching social, political economical environment that the Forex market resides in. For Forex geniuses like George Soros or Jimmy Rogers, this information paints Forex trends as clear as day. Nevertheless, they are still using archives of information and their understanding of outside influences to make informed decisions as opposed to intuitive guesses. Fortunately, beginners or enthusiasts can rely on the expert analysis of professionals and Forex trading companies on the web, who share insight in exchange for loyalty. Below is the general web consensus of the Forex trends of 2011, both the mistakes and opportunities that were made as well as what there is to gain in 2012.

The Major Events that Affected 2011 Forex Trendscurrencies

There were a few major events that sent the Forex trend lines in varying directions. The first came from the United States who lost their AAA credit rating for sovereign bonds. Next there was the move towards ‘Oliver Twist’, that is the Federal Reserve Banks decision to trade some of its shorter dated bonds for longer bonds, with consequently affected the interest rate. The third and most publicized event was the yo-yo economic changes within the Eurozone. Going from red to green and then red again, a pattern which is expected to continue in 2012. This will heavily affect Forex indicator trends as fear of further contamination will dictate the attitude of the market. The US Dollar is expected to be a safe refuge for the Euro and experts in Forex trend forecasts expect a similar role from the British Pound.

Forex Trends and Trading Opportunities

Forex trend strategies and tips that have been suggested by expert Forex trend forecasters include going long with the USD/JPY; they have also warned to be careful with the timing. However, a profitable trend Forex system is to start off small, going larger only when you have confirmation that the strategy is working. Keep a look out for reversal opportunities for the USD/CAD, AUD/USD, NZD/USD and USD/CHF. Look back on Forex market trends in 2011 to ensure when past conditions for reversals are repeated in 2012. The biggest pointer to remember when examining forex trading trends is to remove the bias that is inherent in the human mind. Although it is not possible to completely do this, be consciously aware of ingrained biases. Put analyses, past Forex trends and overarching global conditions first and watch signals from the market as closely and objectively as possible.

Penny Munroe is an avid writer in currency trends and forecasts and aims to educate readers on how to be responsible traders. She started trading under a metatrader 4 broker but after downloading a mt4 demo she now manages her own Forex account.

Taking Advantage of Euro/Swiss Franc Relations in Forex

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As far as Forex trading is concerned, there exists one relationship between currencies of which every Forex trader should know before actually to start trading. It is the correlation between Swiss franc and euro currency pairs – the relationship extremely strong to ignore. According to the Forex market studies, it becomes obvious that the correlation between these currency pairs may be negative 95%. It is called a contrary relationship meaning that – by and large – in case EUR/USD gains in value, USD/CHF loses value in general. The opposite is also truth.

It is generally known that during the longer periods of time, like one year, the majority of currencies traded against the US dollar have over 50% correlation. It happens since the US dollar is a leading currency included in 90% of Forex transactions. Though the strong correlation between USD/CHF and EUR/USD occurs partly thanks to the general dollar impact in the two currency pairs, the explanation why the relations are much stronger than in other currency pairs comes from the tight links between Switzerland the Eurozone.

Switzerland borders on other Eurozone countries and, as a result, enjoys very close economic and political links with its bigger neighbors. The agreements between Switzerland and the Eurozone signed in 1972 and in addition to more than a hundred further mutual agreements that followed later enabled the free influx of Swiss citizens into the labor force of the EU as well as the slow but sure opening of the Switzerland employment market to citizens of the European Union. However, the links do not finish at this point. 60% of Swiss export is intended for the Eurozone, and 80% of imports are from the European Union.

As far as Forex trading is concerned, if EUR/USD and USD/CHF are long, two strongly offsetting positions are obtained or, on the whole, EUR/CHF. In the meantime, if one currency pair is long and another one is short, the same position is actually doubled up, albeit it can look like two different Forex trades. It is essential to realize for the suitable risk management since if something is skewed when one currency pair is short and another is long, losses can be multiplied easily.

The relations between the USD/CHF and EUR/USD decouple when there are different political or fiscal policies. For instance, if elections cause insecurity in Europe while everything is all right and stable in Switzerland, EUR/USD can decrease more in value than USD/CHF increases. On the contrary, if the Eurozone lifts interest rates assertively and Switzerland does not, EUR/USD can gain in value more than USD/CHF loses in value. On the whole, the fact that ranges of the two currencies may diverge more or less than the point difference, is the main reason why interest rate arbitrage in the Forex market applying these two currency pairs doesn’t work. The ratio of the range is measured by dividing USD/CHF range by EUR/USD range.

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